1. Introduction

Against the backdrop of global climate change and the urgent need for green economic recovery, carbon finance has emerged as a vital instrument in optimizing economic structures and promoting sustainable development. This paper examines the role, challenges, and future trajectory of carbon finance within global economic development, with a focus on its significance in driving green growth and achieving carbon neutrality goals. The study employs literature review and case study methodologies to analyze the theoretical foundations of carbon finance, its practical applications, and associated risks. A key case study on Huatai Securities’ Carbon Emission Rights Investment Trading Management Platform illustrates how technological innovation and market mechanisms can enhance carbon market liquidity and corporate carbon asset management. Additionally, the paper identifies current challenges, such as regulatory gaps and market volatility, and proposes actionable recommendations for advancing carbon finance development. The research highlights carbon finance’s potential to broaden financing avenues for enterprises, strengthen global climate action, and foster sustainable economic growth. By addressing critical gaps in policy, innovation, and risk management, this study aims to provide valuable insights for governments, enterprises, and financial institutions seeking to leverage carbon finance as a cornerstone of green economic recovery and sustainable development.

2. Theoretical foundations of carbon finance

2.1. Definition of carbon finance

Carbon finance refers to the use of market mechanisms and financial innovation to address environmental pollution and degradation resulting from global climate change. It primarily involves financial transactions that leverage carbon emission quotas or carbon reduction credits associated with commitments to reduce greenhouse gas emissions and protect the Earth’s environment. The carbon finance market encompasses trading products such as carbon quotas, project-based emission reductions, and carbon derivatives. Key participants include emission-controlled enterprises, project-based emission reduction owners, carbon asset management companies, and financial investment institutions.

2.2. The relationship between carbon finance and sustainable development goals

Carbon finance serves as a pivotal instrument for achieving sustainable development. By reducing transaction costs, supporting decision-making, promoting low-carbon technologies, internalizing and minimizing emission reduction costs, and diversifying risks, it facilitates the development of a low-carbon economy and lays the groundwork for achieving sustainable development goals. Vigorously developing carbon finance facilitates emission reductions, promotes sustainable resource utilisation, and fosters sustainable economic growth. By employing financial innovation, we can fully unlock the value of carbon resources, secure favorable investment and financing, thereby advancing the low-carbon economy.

3. The role of carbon finance in global green economic recovery

Carbon finance plays a pivotal role in global green economic recovery. It stimulates development and investment in clean energy industries and environmental projects, thereby advancing sustainable development. Moreover, it contributes to optimizing energy structures by promoting low-carbon environmental technologies and fostering continuous innovation to reduce carbon emissions. Crucially, carbon finance drives international cooperation, as its advancement requires concerted efforts from governments, enterprises, and international organisations worldwide, thereby establishing it as an integral component of global green economic development [1]. Only through concerted global action to address climate change challenges can we collectively forge a brighter future. Beyond this, carbon finance enhances economic resilience and equity. While driving green recovery, it bolsters economic risk-resistance and fairness, thereby fostering robust growth. Finally, carbon finance stimulates green consumption and investment, broadening and diversifying investor options to further propel the global economy towards greener development.

4. Practical applications and case studies of carbon finance

Huatai Securities Carbon Emission Rights Investment Trading Management Platform

4.1. Introduction

Huatai Securities has successfully obtained carbon emission rights trading qualifications, thereby establishing this platform as a crucial fintech pillar for constructing and refining the carbon emission rights trading market [2]. Through systematic management, the platform enhances carbon market liquidity and corporate carbon asset management efficiency.

Huatai Securities' Carbon Emission Rights Investment and Trading Management Platform employs advanced technologies such as artificial intelligence, blockchain, and the Internet of Things to achieve value chain information sharing and digital collaboration. This enables enterprises to conduct carbon emission rights trading and management more conveniently, further enhancing carbon market liquidity. Concurrently, the platform offers a suite of carbon asset management and carbon finance product services, thereby assisting enterprises in managing carbon assets more effectively, broadening financing channels, and providing robust support for their development.

4.2. Significance for green economic recovery

The establishment of Huatai Securities' Carbon Emission Rights Investment and Trading Management Platform carries profound implications for environmental protection, playing a pivotal role in guiding investors towards environmentally conscious investments and advancing sustainable development. Beyond providing carbon-related investment information and analysis, the platform offers investors a convenient gateway to carbon trading markets, encouraging greater participation in environmental initiatives. More significantly, Huatai Securities advocates a novel investment model through this platform, stimulating corporate environmental awareness from an economic perspective and accelerating green transformation. This initiative not only benefits environmental protection but also generates substantial economic returns for investors.

The development of Huatai Securities' Carbon Emission Rights Investment and Trading Management Platform also makes a substantial contribution to economic recovery. By assisting enterprises in reducing carbon emissions and driving industrial transformation and upgrading, it promotes economic revitalisation. This process not only achieves efficient energy utilisation but also drives technological innovation and advancement. Furthermore, investing in the carbon emissions market offers investors greater opportunities and returns, thereby stimulating capital flows and economic growth. Concurrently, the platform provides the market with a carbon trading venue characterised by information transparency and fair transactions, injecting fresh momentum into economic recovery.

5. Challenges and risk management in carbon finance

Presently, the carbon finance market is developing rapidly, yet it simultaneously faces certain challenges and risks. The foremost issue is the incomplete legal and regulatory framework surrounding carbon finance, rendering market investment inherently risky with widespread credit default and technical risks [3]. Furthermore, the imperfect carbon finance trading system, coupled with limited transaction volumes, results in unstable market development and insufficient liquidity, making it highly susceptible to risk. Moreover, as carbon finance constitutes an innovative green financial product, its pricing mechanisms and risk assessment frameworks remain underdeveloped. This leads to significant market price volatility, thereby introducing market fluctuation risks. Finally, the absence of comprehensive regulatory mechanisms and policies for carbon finance within the current market framework undeniably amplifies the potential risks and challenges facing the carbon finance sector [3].

These challenges are particularly pronounced in emerging markets where institutional capacity is limited [4]. The lack of standardized methodologies for measuring and verifying carbon emissions creates additional uncertainty for investors. Moreover, the carbon market’s susceptibility to external factors such as changes in government policies and international agreements further complicates risk management. The fragmentation of global carbon markets also hampers the development of consistent pricing mechanisms, creating arbitrage opportunities that can destabilize the market. Addressing these issues requires coordinated efforts among policymakers, financial institutions, and market participants to establish robust regulatory frameworks and enhance market transparency.

6. Recommendations for advancing carbon finance development

Enhance local fiscal support, accelerate industrial restructuring, and guide private capital into the carbon finance sector to foster its development [5].

Accelerate carbon finance innovation by promoting carbon trading products and diversified trading models, thereby advancing the domestic carbon market and establishing long-term pricing mechanisms. Financial derivatives such as carbon futures and forwards provide market participants with multiple options while enhancing carbon market liquidity. To this end, it is recommended to diversify the types and methods of trading within the national carbon market as soon as possible. Drawing on international carbon market experience, while refining the fundamental structure of the carbon market, financial derivatives such as carbon futures, carbon trusts, and carbon funds should be gradually introduced. This will encourage enterprises to utilize carbon finance instruments to achieve low-carbon transformation [5].

Promote the formulation and refinement of international laws and regulations, strengthen market supervision, enhance market transparency, reduce investment risks, and reinforce credit and technical risk management.

Establish a comprehensive risk management system to enhance capabilities and standards in addressing diverse challenges and risks, thereby fostering the stable development of carbon financial markets [6].

Strengthen the integration of carbon finance with sustainable development objectives. Implement carbon finance to curb carbon emissions and advance sustainable development. Additionally, encourage enterprises to undertake low-carbon transitions, improve energy efficiency, and reduce costs, thereby enhancing competitiveness and profitability while promoting ecological sustainability.

7. Conclusion

This study comprehensively examines the role, challenges, and future trajectory of carbon finance in driving green economic recovery and sustainable development. Through literature review and case study analysis, the research demonstrates that carbon finance serves as a critical instrument for optimizing economic structures, promoting low-carbon technologies, and advancing global climate action. The case study of Huatai Securities’ Carbon Emission Rights Investment Trading Management Platform illustrates how technological innovation and market mechanisms can enhance carbon market liquidity and support corporate carbon asset management, providing valuable insights for practical applications.

The findings reveal that carbon finance offers significant potential for broadening financing avenues for enterprises, strengthening global climate efforts, and fostering sustainable economic growth. However, the study also identifies key challenges including incomplete regulatory frameworks, market volatility, and underdeveloped pricing mechanisms. These challenges underscore the need for enhanced policy support, financial innovation, and robust risk management systems.

The research recommends several strategic approaches for advancing carbon finance development, including enhancing fiscal support, accelerating product innovation, strengthening regulatory frameworks, and integrating carbon finance with sustainable development objectives. These measures can help address current limitations and create a more stable and efficient carbon finance market.

Despite these valuable insights, this study has certain limitations. The analysis primarily focuses on the Chinese carbon market, which may limit the generalizability of findings to other contexts. Future research should expand the scope to include comparative analysis across different national carbon markets, explore emerging financial instruments in greater depth, and investigate the long-term impacts of carbon finance on sustainable development goals.